Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q4 2023 Earnings Presentation
46 slides from Pareto Bank Asa's earnings presentation, 2024
Slide 1: Financial Results – Fourth Quarter 2023
PARETO BANK Financial Results – Fourth Quarter 2023
Slide 2: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 2
Slide 3: Record High Profit for 2023
RECORD HIGH PROFIT FOR 2023 Profit after tax (NOKm) Comments 605.5 • Profit after tax of NOK 605.5m (NOK 555.5m in Q4-22) driven by a 555.5 504.5 strong net interest margin of 4.6 % (4.4 %) and lending growth of 7 428.4 % year-on-year. 397.6 330.8 • Return on equity after tax (ROE) 13.8 % (14.6 %).
Slide 4: Dividend for 2023
DIVIDEND FOR 2023 Proposed dividend of NOK 3.90 per share 4.50 60 % 50 % 53% 50 % 4.00 49 % 50% 40 % 3.50 30 % 3.00 20 % 2.50 10 % 2.00 3.86 3.90 3.50 00 % 1.50 3.00 -10 % 1.00 -20 % 0.50 -30 % 0.00 -40 % 2020 2021 2022 2023 Dividend per Share (NOK) Payout Ratio 4
Slide 5: Annual Profits
ANNUAL PROFITS Profit after tax (NOKm) 605.5 555.5 504.5 428.4 397.6 330.8 312.6 247.3 154.2 166.4 109.7 67.7 47.6 12.4 22.5 8.6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 5
Slide 6: Fourth Quarter 2023 Highlights
FOURTH QUARTER 2023 Highlights • Profit after tax NOK 165.0m (NOK 172.1m in Q4-22). • Return on equity after tax 13.8 % (17.4 %). • Strong net interest income NOK 297.3m (NOK 253.5m) due to increase in lending margin. • Lending growth NOK 259m to NOK 18,518m. Growth within corporate and offshore fin
Slide 7: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 172.1 17.4 % 18.7 % 18.6 % 165.0 155.2 17.6 % 13.9 % 13.8 % Q4-22 Q3-23 Q4-23 Q4-22 Q3-23 Q4-23 31.12.2022 30.09.2023 31.12.2023 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 297.3 281.3 0.23% 253.5 0.17% 17.8% 17.7% 16.5
Slide 8: Financials
Highlights Financials Business Area Update & Outlook 8
Slide 9: Income Statement
INCOME STATEMENT P&L (NOKm) Q4-23 Q4-22 2023 2022 Increased lending rates contributed to growth in Net interest income 297.3 253.5 1,112.6 928.6 interest income compared to the previous quarter. Net other operating income 12.1 20.7 6.7 36.7 Improved return on liquidity reserve. Total net income 309.
Slide 10: Change in Quarterly Net Interest Income
CHANGE IN QUARTERLY NET INTEREST INCOME (NOKm) 20.9 7.4 19.6 2.0 Q4-23 11.8 297.3 5.3 Q3-23 3.7 281.3 1.8 220.0 Market Market Lending Lending Fee Surplus liquidity Deposit Deposit funding funding volume rate income and other * volume rate volume rate 10 *) Other net interest income includes fee paid
Slide 11: Change in Annual Net Interest Income
CHANGE IN ANNUAL NET INTEREST INCOME (NOKm) 152.7 34.1 14.5 395.5 241.3 2023 30.8 1 112.6 2022 98.2 928.6 209.7 - Market Market Lending Lending Fee Surplus liquidity Deposit Deposit funding funding volume rate income and other * volume rate volume rate 11 *) Other net interest income includes fee pa
Slide 12: Interest Margins
INTEREST MARGINS Lending and deposit margin Net interest margin 6.1 % 6.3 % 6.1 % 6.2 % 6.3 % 4.6 % 4.6 % 5.5 % 5.5 % 4.6 % 5.2 % 5.1 % 4.5 % 4.5 % 4.8 % 1.4 % 1.1 % 0.9 % 0.8 % 0.7 % Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Lending margin over Nibor Deposit margin over Nibor Net
Slide 13: Quarterly Change in Impairments
QUARTERLY CHANGE IN IMPAIRMENTS Impairments (NOKm) Impairments (NOKm) Q4-23 2023 42.1 Stage 1 12.2 18.6 Stage 2 0.9 13.3 36.4 Stage 3 -21.2 34.3 30.3 Write-offs 50.2 55.4 Total impairments 42.1 121.7 12.9 • Total model-based impairments in stage 1 and 2 were NOK 13.1m. • Net effect of individual imp
Slide 14: Changes in Stage 2 & 3
CHANGES IN STAGE 2 & 3 Stage 2 Stage 3 • Commitments on watch list, under forbearance or where there has • Commitments which are more than 90 days past due, where the otherwise been a material increase in risk. debtor is considered unlikely to pay, or where there is objective evidence of a future lo
Slide 15: Solidity and Capital Requirements
SOLIDITY AND CAPITAL REQUIREMENTS • Solid capital position due to private placement in September 2023. 18.6 % • Capacity for profitable growth under good market conditions. 17.1 % 16.7 % NFSA expectation 16.7 % • Long-term capital target is a CET1 ratio of at least 16.7 %. Minimum • Pareto Bank will
Slide 16: Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 16
Slide 17: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Exposure (NOKm) SHIP FINANCING NOK 1,377m 6% COMMERCIAL RESIDENTIAL FINANCING NOK 2,562m 12% 39% COMMERCIAL PROPERTY 14% RESIDENTIAL PROPERTY FINANCING FINANCING NOK 3,114m NOK 8,409m 28% CORPORATE FINANCING NOK 6,057m 17
Slide 18: Quarterly Exposure per Business Area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKb) 8.68 8.42 8.34 8.41 7.75 6.04 6.06 5.79 5.79 5.43 3.33 3.07 3.08 2.97 3.11 2.56 2.16 2.30 1.81 1.81 1.62 1.68 1.47 1.50 1.38 Residential property financing Commercial property financing Commercial residential financing Corporate financing Ship financing Q4
Slide 19: Residential Property Financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 8,409m • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities. • Equity contribution of minimum 25 % on land financing. Land without houses 2,011 • Thorough analysis of al
Slide 20: Market Outlook: Residential Property
MARKET OUTLOOK Residential property Higher interest rates and weak development in household disposable income may lead to a fall in housing prices. Selective market where it is difficult to meet pre-sale requirements in many new-build projects. Easier for affordable housing in the outskirts of Oslo.
Slide 21: Commercial Residential & Property Financing
COMMERCIAL RESIDENTIAL & PROPERTY FINANCING Credit update Commercial res. & prop. exposure (NOKm) Total NOK 5,676m • Commercial residential includes financing of housing for rent, while commercial property includes financing of commercial property. • Exposure growth of NOK 264m within commercial res
Slide 22: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 3,114m • Financing of cash-flow based commercial property and development. • Equity contribution depending on underlying risk factors and entry point of the market cycle. More conservative credit practice appli
Slide 23: Market Outlook: Commercial Property
MARKET OUTLOOK Commercial property Activity in the transaction market is expected to pick up towards the end of 2024. Commercial property prices have fallen during 2023 and are expected to fall somewhat further. A moderate increase in yields is expected. Continued growth in rental income may compens
Slide 24: Corporate Financing
CORPORATE FINANCING Exposure (NOKm) Total NOK 6,057m Credit update Total NOK 6,057m • Tailor-made financing solutions to medium-sized enterprises. • Roughly unchanged exposure in Q4-23. • Follow-up of a small number of customers (in stage 2 and 3) that are affected by lower demand, higher operationa
Slide 25: Market Outlook: Corporate
MARKET OUTLOOK Corporate Pareto Bank is an attractive partner for medium- sized businesses and still a small player in the large space for corporate lending. Corporate profitability is in general under pressure. Large differences in activity and profitability across industries. Good deal flow expect
Slide 26: Ship Financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,377m • Conservative approach focusing on corporate customers with solid balance sheets, modern high-quality assets and equity Bulk 277 LTV 42 % contribution of minimum 45 %. Offshore Subsea 230 LTV 46 % • Targeted customers are reputable Norwe
Slide 27: Market Outlook: Shipping and Offshore
MARKET OUTLOOK Shipping and offshore Moderate outlook for the dry bulk market with manageable supply growth. Uncertainty regarding demand given macroeconomic headwinds and fragile Chinese growth. Strong tanker markets backed by low order books, continued strong end-user demand and increased trade gr
Slide 28: Long-Term Ambitions
LONG-TERM AMBITIONS ROE Dividend 15 % min. 50 % 14.6 % 52.9 % 14.0 % 49.4 % 50.1 % 13.8 % 2021 2022 2023 2021 2022 2023 28
Slide 29: Lending Growth
LENDING GROWTH Per business area (NOKm) 18,000 Ship Financing 16,000 14,000 Corporate Financing * 12,000 Commercial Residential Financing ** 10,000 Commercial Property Financing 8,000 6,000 4,000 Residential Property Financing 2,000 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 30: ROE and Leverage Ratio
ROE AND LEVERAGE RATIO 16.0 % 15.9 % 16.0 % 15.6 % 14.8 % 15.0 % 25.0 % 14.3 % 14.6 % 14.0 % 14.0 % 13.8 % 12.7 % 13.0 % 12.0 % 20.0 % 18.2 % 17.1 % 16.3 % 16.0 % 16.5 % 10.0 % 15.7 % 14.3 % 14.6 % 13.7 % 15.0 % 8.6 % 8.0 % 12.4 % 11.7 % 11.4 % 12.3 % 11.9 % 10.2 % 6.0 % 6.3 % 10.0 % 4.0 % 3.0 % 5.0
Slide 31: Book Value and Dividend per Share
BOOK VALUE AND DIVIDEND PER SHARE Cumulative since 2008 (NOK) 78.1 74.9 66.8 18.8 18.8 59.2 14.9 52.2 11.4 45.8 8.4 41.2 6.4 35.3 5.7 31.1 27.9 4.1 24.2 3.1 56.1 59.3 21.0 3.1 51.9 18.3 19.4 2.5 47.8 17.5 17.8 1.9 43.8 39.4 35.4 28.0 31.1 21.6 24.7 17.5 17.6 17.6 18.1 19.1 2008 2009 2010 2011 2012 2
Slide 32: Appendix
APPENDIX (Pareto bank
Slide 33: Largest Shareholders
LARGEST SHAREHOLDERS 31 Desember 2023 Name Shares % total • The Company has 76,782,423 shares outstanding. One class 1 Pareto AS 15,356,484 20.00 % of shares where each share carries one voting right. 2 Société Générale 6,943,049 9.04 % • Diversified investor base with 3,541 shareholders. 3 Hellegje
Slide 34: The Share
THE SHARE Earnings per share (NOK) Book value per share (NOK) 2.39 2.01 59.32 1.89 57.36 56.12 Q4-22 Q3-23 Q4-23 Q4-22 Q3-23 Q4-23 34
Slide 35: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q4-23 Q3-23 Q2-23 Q1-23 Q4-22 Net interest income 297.3 281.3 271.5 262.5 253.5 Net other operating income 12.1 3.0 -5.4 -3.0 20.7 Total net income 309.4 284.3 266.1 259.5 274.2 Total operating expenses 51.1 50.4 51.4 50.5 48.9 Operating profit before 258.3 233.
Slide 36: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET (NOKm) Q4-23 Q3-23 Q2-23 Q1-23 Q4-22 Loans to credit institutions 1,651 2,498 2,001 2,230 747 Loans to customers 18,518 18,260 18,344 17,707 17,346 Bonds and other securities 5,422 4,245 3,882 3,952 4,007 Shareholdings in associated companies 22 23 23 23 23 Other assets 234 1
Slide 37: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Estimated annualized margins including commissions, excluding front and back-end fees over 3M NOKm, estimated interest contribution including commissions, excluding front and back-end fees over 3M Nib
Slide 38: Number of Customers
NUMBER OF CUSTOMERS Per business area Property Financing 274 Corporate Finanicng 156 Ship Financing 17 Retail (Mortgages) 16 38 Non-consolidated
Slide 39: Real Estate Financing Exposure
REAL ESTATE FINANCING EXPOSURE Geographical residential property exposure Total NOK 10,971m* Geographical commercial property exposure Total NOK 3,114m* 3% 3% 3% 7% 5% 9% 15% 33% Oslo Oslo Viken Vestland 45% Vestfold & Telemark Viken Other Sweden Sweden Vestfold & Telemark Other Innlandet 17% 35% 25
Slide 40: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 11,946 Percent customer deposits of net lending to customers Senior debt 7,756 AT1 & T2 debt 1,149 64.5 % 62.8 % 60.9 % 61.0 % 58.3 % Other debt 441 7,756 Equity capital 4,555 7,877 7,718 7,918 7,183 Key funding and liquidity ratios • Depo
Slide 41: Liquidity Buffer
LIQUIDITY BUFFER Low credit and market risk (NOKm) Comments 178 • Cash on hand. • Highly liquid bonds. 1,986 • Low credit risk. • No interest rate or foreign exchange risk. Cash (Norges Bank & DNB) • Access to central bank Bonds issued by government & PSEs facilities and repo market. Covered bonds O
Slide 42: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 2,918 70 NOK 10 - 20m 1,598 145 429 NOK 5 - 10m 880 230 Floating rate retail 255 NOK 2 - 5m 1,220 1,722 3,893 NOK 0 - 2m 1,112 1,978 Floating rate corporate 2,445 - 1,000 2,000 3,000 4,000 Floating rate Fixed rate 2,606 S
Slide 43: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 250 195 200 575 164 120 145 122 2,000 85 1,650 66 1,400 1,400 1,270 3M 6M 12M 2Y 3Y 5Y 2024 2025 2026 2027 2028 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subordinated C
Slide 44: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 7,063 None / very low risk 7,918 53% 53% 53% 52% 52% 10,544 Low risk 11,246 37% 35% 35% 35% 34% 1,860 Moderate risk 2,035 146 Some risk 289 163 11% 10% High risk 9% 10% 9% 2 309 Very high risk 202 Q4-22 Q1-2
Slide 45: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 547 3% < 10 565 20 % 5,095 10 - 50 5,074 23 % 4,901 50 - 100 < 10 5,411 10 - 50 3,439 6% 50 - 100 100 - 150 2,343 100 - 150 150 - 200 2,070 150 - 200 200 - 250 2,731 > 250 1,828 12 % 200 - 250 1,296 2,
Slide 46: ( Pareto bank
( Pareto bank